As venture firms dried up, Angels set funding record

Queen City Angels, one of the busiest angel capital organizations in the country, according to one of its officers, made its most investments ever during the past year.

The organization, made up of wealthy individuals who buy stakes in emerging companies, invested more than $5 million in 15 companies in the past year. Before that, the most investments the group had made since its founding – nine years ago – was 12, said Chairman Tony Shipley.

At the same time, Queen City Angels added eight new investors, bringing its total to 34. Each investor commits to invest at least $250,000 over three years.

Many angel-backed companies typically turn to venture capital companies for their next round of financing when they’re ready for a growth spurt. But the number of venture capital companies has dropped by half in the past year. So angel capital groups such as Queen City are taking matters into their own hands.

“We basically became the next round of funding,” Shipley said. “It’s all driven by the meltdown of ’08.”

The financial crisis and recession fueled some of the increase in investments as the organization followed up with cash infusions in companies in which it had previously invested. But Queen City Angels also boosted investments in companies it hadn’t invested in previously. It did six deals with new companies in the past year, up from just one the previous.

“When the recession first happened, everybody took a time-out to see what was going on,” Shipley said. “But anytime there’s a downturn in the economy, that does drive more entrepreneurial activity.”

‘More Money at the table’

Membership growth also helped fuel investment activity, said Jim Cunningham, who manages Queen City Angels’ operations as executive director of C-Cap, a unit of Cincinnati technology trade association The Circuit.

“There’s more money at the table,” he said.

He said the angel investor group is one of the five most active in the country, putting more than $50 million over the past nine years into companies, most of which are local.

Stefan Antonsson, one of the new investors, joined the group last fall. He had worked in the drug business for about 25 years, including with local companies such as Xanodyne Pharmaceuticals Inc. He is now a consultant to the industry. He got involved with Blue Ash Pharmaceuticals, a company the angel group invested in during the past year. Antonsson, who works from his Mount Lookout home, is finding plenty of investment opportunities.

“I’ve been quite surprised by the number and quality of deals,” he said. “I hope to be involved, learn and hopefully profit.”

Adam Malofsky, CEO of Bioformix, is benefiting from one of those opportunities that Queen City Angels found. His Blue Ash-based chemicals company was one of the new companies in which Queen City Angels invested in the past year. In fact, a $1.3 million investment this summer was its largest single investment ever in one company, Shipley said.

Malofsky developed a sustainable plastics platform that can be used for dozens of purposes. He’s starting by making adhesives and coatings that bond faster and have more strength than products that are now on the market, Malofsky said. Malofsky hooked up with the angel group when he met John Habbert, a Queen City Angels investor who happens to be a chemical engineer.

“People invest in things they know and understand,” Malofsky said.

Malofsky is using the new capital to get patents, develop technology and build sales. He just signed a deal with Norwood-based chemicals firm Shepherd Chemical Co., which will provide manufacturing, research and operational services to Bioformix. Malofsky hopes to build Bioformix within five years into a company that generates $40 million to $50 million in annual revenue.